{
  "url": "https://openlegislation.uk/eu-directive-1998-26/introduction",
  "json_url": "https://openlegislation.uk/eu-directive-1998-26/introduction.json",
  "legislation": "eudr/1998/26",
  "legislation_title": "Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems",
  "legislation_url": "https://openlegislation.uk/eu-directive-1998-26",
  "path": "introduction",
  "kind": "introduction",
  "number": null,
  "heading": "Introductory text",
  "text": "Directive 98/26/EC of the European Parliament and of the Council\nof 19 May 1998\non settlement finality in payment and securities settlement systems\nTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,\nHaving regard to the Treaty establishing the European Community, and in particular Article 100a thereof,\nHaving regard to the proposal from the Commission,\nHaving regard to the opinion of the European Monetary Institute,\nHaving regard to the opinion of the Economic and Social Committee,\nActing in accordance with the procedure laid down in Article 189b of the Treaty,\n(1)\nWhereas the Lamfalussy report of 1990 to the Governors of the central banks of the Group of Ten Countries demonstrated the important systemic risk inherent in payment systems which operate on the basis of several legal types of payment netting, in particular multilateral netting; whereas the reduction of legal risks associated with participation in real time gross settlement systems is of paramount importance, given the increasing development of these systems;\n(2)\nWhereas it is also of the utmost importance to reduce the risk associated with participation in securities settlement systems, in particular where there is a close connection between such systems and payment systems;\n(3)\nWhereas this Directive aims at contributing to the efficient and cost effective operation of cross-border payment and securities settlement arrangements in the Community, which reinforces the freedom of movement of capital in the internal market; whereas this Directive thereby follows up the progress made towards completion of the internal market, in particular towards the freedom to provide services and liberalisation of capital movements, with a view to the realisation of Economic and Monetary Union;\n(4)\nWhereas it is desirable that the laws of the Member States should aim to minimise the disruption to a system caused by insolvency proceedings against a participant in that system;\n(5)\nWhereas a proposal for a Directive on the reorganisation and winding-up of credit institutions submitted in 1985 and amended on 8 February 1988 is still pending before the Council; whereas the Convention on Insolvency Proceedings drawn up on 23 November 1995 by the Member States meeting within the Council explicitly excludes insurance undertakings, credit institutions and investment firms;\n(6)\nWhereas this Directive is intended to cover payment and securities settlement systems of a domestic as well as of a cross-border nature; whereas the Directive is applicable to Community systems and to collateral security constituted by their participants, be they Community or third country participants, in connection with participation in these systems;\n(7)\nWhereas Member States may apply the provisions of this Directive to their domestic institutions which participate directly in third country systems and to collateral security provided in connection with participation in such systems;\n(8)\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n(9)\nWhereas the reduction of systemic risk requires in particular the finality of settlement and the enforceability of collateral security; whereas collateral security is meant to comprise all means provided by a participant to the other participants in the payment and/or securities settlement systems to secure rights and obligations in connection with that system, including repurchase agreements, statutory liens and fiduciary transfers; whereas regulation in national law of the kind of collateral security which can be used should not be affected by the definition of collateral security in this Directive;\n(10)\nWhereas this Directive, by covering collateral security provided in connection with operations of the central banks of the Member States functioning as central banks, including monetary policy operations, assists the European Monetary Institute in its task of promoting the efficiency of cross-border payments with a view to the preparation of the third stage of Economic and Monetary Union and thereby contributes to developing the necessary legal framework in which the future European central bank may develop its policy;\n(11)\nWhereas transfer orders and their netting should be legally enforceable under all Member States' jurisdictions and binding on third parties;\n(12)\nWhereas rules on finality of netting should not prevent systems testing, before the netting takes place, whether orders that have entered the system comply with the rules of that system and allow the settlement of that system to take place;\n(13)\nWhereas nothing in this Directive should prevent a participant or a third party from exercising any right or claim resulting from the underlying transaction which they may have in law to recovery or restitution in respect of a transfer order which has entered a system, e.g. in case of fraud or technical error, as long as this leads neither to the unwinding of netting nor to the revocation of the transfer order in the system;\n(14)\nWhereas it is necessary to ensure that transfer orders cannot be revoked after a moment defined by the rules of the system;\n(14a)\nWhereas national competent authorities or supervisors should ensure that the operators of the systems establishing the interoperable systems have agreed to the extent possible on common rules on the moment of entry into the interoperable systems. National competent authorities or supervisors should ensure that the rules on the moment of entry into an interoperable system are coordinated insofar as possible and necessary in order to avoid legal uncertainty in the event of default of a participating system;\n(15)\nWhereas it is necessary that a Member State should immediately notify other Member States of the opening of insolvency proceedings against a participant in the system;\n(16)\nWhereas insolvency proceedings should not have a retroactive effect on the rights and obligations of participants in a system;\n(17)\nWhereas, in the event of insolvency proceedings against a participant in a system, this Directive furthermore aims at determining which insolvency law is applicable to the rights and obligations of that participant in connection with its participation in a system;\n(18)\nWhereas collateral security should be insulated from the effects of the insolvency law applicable to the insolvent participant;\n(19)\nWhereas the provisions of Article 9(2) should only apply to a register, account or centralized deposit system which evidences the existence of proprietary rights in or for the delivery or transfer of the securities concerned;\n(20)\nWhereas the provisions of Article 9(2) are intended to ensure that if the participant, the central bank of a Member State or the future European central bank has a valid and effective collateral security as determined under the law of the Member State where the relevant register, account or centralized deposit system is located, then the validity and enforceability of that collateral security as against that system (and the operator thereof) and against any other person claiming directly or indirectly through it, should be determined solely under the law of that Member State;\n(21)\nWhereas the provisions of Article 9(2) are not intended to prejudice the operation and effect of the law of the Member State under which the securities are constituted or of the law of the Member State where the securities may otherwise be located (including, without limitation, the law concerning the creation, ownership or transfer of such securities or of rights in such securities) and should not be interpreted to mean that any such collateral security will be directly enforceable or be capable of being recognised in any such Member State otherwise than in accordance with the law of that Member State;\n(22)\nWhereas it is desirable that Member States endeavour to establish sufficient links between all the securities settlement systems covered by this Directive with a view towards promoting maximum transparency and legal certainty of transactions relating to securities;\n(22a)\nWhereas in the case of interoperable systems, a lack of coordination as to which rules apply on the moment of entry and irrevocability may expose participants in one system, or even the system operator itself, to the spill-over effects of a default in another system. In order to limit systemic risk, it is desirable to provide that system operators of interoperable systems coordinate the rules on the moment of entry and irrevocability in the systems they operate;\n(23)\nWhereas the adoption of this Directive constitutes the most appropriate way of realising the above-mentioned objectives and does not go beyond what is necessary to achieve them,\nHAVE ADOPTED THIS DIRECTIVE:",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Deleted by Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims (Text with EEA relevance)."
    },
    {
      "type": "F",
      "label": "F2",
      "text": "Inserted by Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims (Text with EEA relevance)."
    },
    {
      "type": "footnote",
      "label": "f1",
      "text": "OJ C 207, 18.7.1996, p. 13, and OJ C 259, 26.8.1997, p. 6."
    },
    {
      "type": "footnote",
      "label": "f2",
      "text": "Opinion delivered on 21 November 1996."
    },
    {
      "type": "footnote",
      "label": "f3",
      "text": "OJ C 56, 24.2.1997, p. 1."
    },
    {
      "type": "footnote",
      "label": "f4",
      "text": "Opinion of the European Parliament of 9 April 1997 (OJ C 132, 28.4.1997, p. 74), Council Common Position of 13 October 1997 (OJ C 375, 10.12.1997, p. 34) and Decision of the European Parliament of 29 January 1998 (OJ C 56, 23.2.1998). Council Decision of 27 April 1998."
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eudr/1998/26/introduction",
    "retrieved_at": "2026-11-01T15:23:07.730666+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}